AI Data Center Boom Sparks Electricity Grid Crisis and Consumer Cost Concerns

The AI bubble may be showing up in an unexpected place: the shady forecasts of future electricity demand -- and skyrocketing bills | Fortune

But the challenges -- some say the impossibility -- of building new power plants to meet that demand so quickly has set off alarm bells for lawmakers, policymakers and regulators who wonder if those utility forecasts can be trusted. One burning question is whether the forecasts are based on data center projects that may never get built -- eliciting concern that regular ratepayers could be stuck with the bill to build unnecessary power plants and grid infrastructure at a cost of billions of dollars. The scrutiny comes as analysts warn of the risk of an artificial intelligence investment bubble that's ballooned tech stock prices and could burst. Meanwhile, consumer advocates are finding that ratepayers in some areas -- such as the mid-Atlantic electricity grid, which encompasses all or parts of 13 states stretching from New Jersey to Illinois, as well as Washington, D.C. -- are already underwriting the cost to supply power to data centers, some of them built, some not. "There's speculation in there," said Joe Bowring, who heads Monitoring Analytics, the independent market watchdog in the mid-Atlantic grid territory. "Nobody really knows. Nobody has been looking carefully enough at the forecast to know what's speculative, what's double-counting, what's real, what's not." There is no standard practice across grids or for utilities to vet such massive projects, and figuring out a solution has become a hot topic, utilities and grid operators say. Uncertainty around forecasts is typically traced to a couple of things. One concerns developers seeking a grid connection, but whose plans aren't set in stone or lack the heft -- clients, financing or otherwise -- to bring the project to completion, industry and regulatory officials say. Another is data center developers submitting grid connection requests in various separate utility territories, PJM Interconnection, which operates the mid-Atlantic grid, and Texas lawmakers have found. Often, developers, for competitive reasons, won't tell utilities if or where they've submitted other requests for electricity, PJM said. That means a single project could inflate the energy forecasts of multiple utilities. The effort to improve forecasts got a high-profile boost in September, when a Federal Energy Regulatory Commission member asked the nation's grid operators for information on how they determine that a project is not only viable, but will use the electricity it says it needs. "Better data, better decision-making, better and faster decisions mean we can get all these projects, all this infrastructure built," the commissioner, David Rosner, said in an interview. The Edison Electric Institute, a trade association of for-profit electric utilities, said it welcomed efforts to improve demand forecasting. The Data Center Coalition, which represents tech giants like Google and Meta and data center developers, has urged regulators to request more information from utilities on their forecasts and to develop a set of best practices to determine the commercial viability of a data center project. The coalition's vice president of energy, Aaron Tinjum, said improving the accuracy and transparency of forecasts is a "fundamental first step of really meeting this moment" of energy growth. "Wherever we go, the question is, 'Is the (energy) growth real? How can we be so sure?'" Tinjum said. "And we really view commercial readiness verification as one of those important kind of low-hanging opportunities for us to be adopting at this moment." Igal Feibush, the CEO of Pennsylvania Data Center Partners, a data center developer, said utilities are in a "fire drill" as they try to vet a deluge of data center projects all seeking electricity. The vast majority, he said, will fall off because many project backers are new to the concept and don't know what it takes to get a data center built. States also are trying to do more to find out what's in utility forecasts and weed out speculative or duplicative projects. In Texas, which is attracting large data center projects, lawmakers still haunted by a blackout during a deadly 2021 winter storm were shocked when told in 2024 by the grid operator, the Electric Reliability Council of Texas, that its peak demand could nearly double by 2030. They found that state utility regulators lacked the tools to determine whether that was realistic. Texas state Sen. Phil King told a hearing earlier this year that the grid operator, utility regulators and utilities weren't sure if the power requests "are real or just speculative or somewhere in between." Lawmakers passed legislation sponsored by King, now law, that requires data center developers to disclose whether they have requests for electricity elsewhere in Texas and to set standards for developers to show that they have a substantial financial commitment to a site. PPL Electric Utilities, which delivers power to 1.5 million customers across central and eastern Pennsylvania, projects that data centers will more than triple its peak electricity demand by 2030. Vincent Sorgi, president and CEO of PPL Corp., told analysts on an earnings call this month that the data center projects "are real, they are coming fast and furious" and that the "near-term risk of overbuilding generation simply does not exist." The data center projects counted in the forecast are backed by contracts with financial commitments often reaching tens of millions of dollars, PPL said. Still, PPL's projections helped spur a state lawmaker, Rep. Danilo Burgos, to introduce a bill to bolster the authority of state utility regulators to inspect how utilities assemble their energy demand forecasts. Ratepayers in Burgos' Philadelphia district just absorbed an increase in their electricity bills -- attributed by the utility, PECO, to the rising cost of wholesale electricity in the mid-Atlantic grid driven primarily by data center demand. That's why ratepayers need more protection to ensure they are benefiting from the higher cost, Burgos said. "Once they make their buck, whatever company," Burgos said, "you don't see no empathy towards the ratepayers."

Future data centers are driving up forecasts for energy demand. States want proof they'll get built

HARRISBURG, Pa. (AP) -- The forecasts are eye-popping: utilities saying they'll need two or three times more electricity within a few years to power massive new data centers that are feeding a fast-growing AI economy. But the challenges -- some say the impossibility -- of building new power plants to meet that demand so quickly has set off alarm bells for lawmakers, policymakers and regulators who wonder if those utility forecasts can be trusted. One burning question is whether the forecasts are based on data center projects that may never get built -- eliciting concern that regular ratepayers could be stuck with the bill to build unnecessary power plants and grid infrastructure at a cost of billions of dollars. The scrutiny comes as analysts warn of the risk of an artificial intelligence investment bubble that's ballooned tech stock prices and could burst. Meanwhile, consumer advocates are finding that ratepayers in some areas -- such as the mid-Atlantic electricity grid, which encompasses all or parts of 13 states stretching from New Jersey to Illinois, as well as Washington, D.C. -- are already underwriting the cost to supply power to data centers, some of them built, some not. "There's speculation in there," said Joe Bowring, who heads Monitoring Analytics, the independent market watchdog in the mid-Atlantic grid territory. "Nobody really knows. Nobody has been looking carefully enough at the forecast to know what's speculative, what's double-counting, what's real, what's not." Suspicions about skyrocketing demand There is no standard practice across grids or for utilities to vet such massive projects, and figuring out a solution has become a hot topic, utilities and grid operators say. Uncertainty around forecasts is typically traced to a couple of things. One concerns developers seeking a grid connection, but whose plans aren't set in stone or lack the heft -- clients, financing or otherwise -- to bring the project to completion, industry and regulatory officials say. Another is data center developers submitting grid connection requests in various separate utility territories, PJM Interconnection, which operates the mid-Atlantic grid, and Texas lawmakers have found. Often, developers, for competitive reasons, won't tell utilities if or where they've submitted other requests for electricity, PJM said. That means a single project could inflate the energy forecasts of multiple utilities. The effort to improve forecasts got a high-profile boost in September, when a Federal Energy Regulatory Commission member asked the nation's grid operators for information on how they determine that a project is not only viable, but will use the electricity it says it needs. "Better data, better decision-making, better and faster decisions mean we can get all these projects, all this infrastructure built," the commissioner, David Rosner, said in an interview. The Edison Electric Institute, a trade association of for-profit electric utilities, said it welcomed efforts to improve demand forecasting. Real, speculative, or 'somewhere in between' The Data Center Coalition, which represents tech giants like Google and Meta and data center developers, has urged regulators to request more information from utilities on their forecasts and to develop a set of best practices to determine the commercial viability of a data center project. The coalition's vice president of energy, Aaron Tinjum, said improving the accuracy and transparency of forecasts is a "fundamental first step of really meeting this moment" of energy growth. "Wherever we go, the question is, 'Is the (energy) growth real? How can we be so sure?'" Tinjum said. "And we really view commercial readiness verification as one of those important kind of low-hanging opportunities for us to be adopting at this moment." Igal Feibush, the CEO of Pennsylvania Data Center Partners, a data center developer, said utilities are in a "fire drill" as they try to vet a deluge of data center projects all seeking electricity. The vast majority, he said, will fall off because many project backers are new to the concept and don't know what it takes to get a data center built. States also are trying to do more to find out what's in utility forecasts and weed out speculative or duplicative projects. In Texas, which is attracting large data center projects, lawmakers still haunted by a blackout during a deadly 2021 winter storm were shocked when told in 2024 by the grid operator, the Electric Reliability Council of Texas, that its peak demand could nearly double by 2030. They found that state utility regulators lacked the tools to determine whether that was realistic. Texas state Sen. Phil King told a hearing earlier this year that the grid operator, utility regulators and utilities weren't sure if the power requests "are real or just speculative or somewhere in between." Lawmakers passed legislation sponsored by King, now law, that requires data center developers to disclose whether they have requests for electricity elsewhere in Texas and to set standards for developers to show that they have a substantial financial commitment to a site. Electricity bills are rising, too PPL Electric Utilities, which delivers power to 1.5 million customers across central and eastern Pennsylvania, projects that data centers will more than triple its peak electricity demand by 2030. Vincent Sorgi, president and CEO of PPL Corp., told analysts on an earnings call this month that the data center projects "are real, they are coming fast and furious" and that the "near-term risk of overbuilding generation simply does not exist." The data center projects counted in the forecast are backed by contracts with financial commitments often reaching tens of millions of dollars, PPL said. Still, PPL's projections helped spur a state lawmaker, Rep. Danilo Burgos, to introduce a bill to bolster the authority of state utility regulators to inspect how utilities assemble their energy demand forecasts. Ratepayers in Burgos' Philadelphia district just absorbed an increase in their electricity bills -- attributed by the utility, PECO, to the rising cost of wholesale electricity in the mid-Atlantic grid driven primarily by data center demand. That's why ratepayers need more protection to ensure they are benefiting from the higher cost, Burgos said. "Once they make their buck, whatever company," Burgos said, "you don't see no empathy towards the ratepayers." ___ Follow Marc Levy at http://twitter.com/timelywriter.

Future Data Centers Are Driving up Forecasts for Energy Demand. States Want Proof They'll Get Built

HARRISBURG, Pa. (AP) -- The forecasts are eye-popping: utilities saying they'll need two or three times more electricity within a few years to power massive new data centers that are feeding a fast-growing AI economy. But the challenges -- some say the impossibility -- of building new power plants to meet that demand so quickly has set off alarm bells for lawmakers, policymakers and regulators who wonder if those utility forecasts can be trusted. One burning question is whether the forecasts are based on data center projects that may never get built -- eliciting concern that regular ratepayers could be stuck with the bill to build unnecessary power plants and grid infrastructure at a cost of billions of dollars. The scrutiny comes as analysts warn of the risk of an artificial intelligence investment bubble that's ballooned tech stock prices and could burst. Meanwhile, consumer advocates are finding that ratepayers in some areas -- such as the mid-Atlantic electricity grid, which encompasses all or parts of 13 states stretching from New Jersey to Illinois, as well as Washington, D.C. -- are already underwriting the cost to supply power to data centers, some of them built, some not. "There's speculation in there," said Joe Bowring, who heads Monitoring Analytics, the independent market watchdog in the mid-Atlantic grid territory. "Nobody really knows. Nobody has been looking carefully enough at the forecast to know what's speculative, what's double-counting, what's real, what's not." Suspicions about skyrocketing demand There is no standard practice across grids or for utilities to vet such massive projects, and figuring out a solution has become a hot topic, utilities and grid operators say. Uncertainty around forecasts is typically traced to a couple of things. One concerns developers seeking a grid connection, but whose plans aren't set in stone or lack the heft -- clients, financing or otherwise -- to bring the project to completion, industry and regulatory officials say. Another is data center developers submitting grid connection requests in various separate utility territories, PJM Interconnection, which operates the mid-Atlantic grid, and Texas lawmakers have found. Often, developers, for competitive reasons, won't tell utilities if or where they've submitted other requests for electricity, PJM said. That means a single project could inflate the energy forecasts of multiple utilities. The effort to improve forecasts got a high-profile boost in September, when a Federal Energy Regulatory Commission member asked the nation's grid operators for information on how they determine that a project is not only viable, but will use the electricity it says it needs. "Better data, better decision-making, better and faster decisions mean we can get all these projects, all this infrastructure built," the commissioner, David Rosner, said in an interview. The Edison Electric Institute, a trade association of for-profit electric utilities, said it welcomed efforts to improve demand forecasting. Real, speculative, or 'somewhere in between' The Data Center Coalition, which represents tech giants like Google and Meta and data center developers, has urged regulators to request more information from utilities on their forecasts and to develop a set of best practices to determine the commercial viability of a data center project. The coalition's vice president of energy, Aaron Tinjum, said improving the accuracy and transparency of forecasts is a "fundamental first step of really meeting this moment" of energy growth. "Wherever we go, the question is, 'Is the (energy) growth real? How can we be so sure?'" Tinjum said. "And we really view commercial readiness verification as one of those important kind of low-hanging opportunities for us to be adopting at this moment." Igal Feibush, the CEO of Pennsylvania Data Center Partners, a data center developer, said utilities are in a "fire drill" as they try to vet a deluge of data center projects all seeking electricity. The vast majority, he said, will fall off because many project backers are new to the concept and don't know what it takes to get a data center built. States also are trying to do more to find out what's in utility forecasts and weed out speculative or duplicative projects. In Texas, which is attracting large data center projects, lawmakers still haunted by a blackout during a deadly 2021 winter storm were shocked when told in 2024 by the grid operator, the Electric Reliability Council of Texas, that its peak demand could nearly double by 2030. They found that state utility regulators lacked the tools to determine whether that was realistic. Texas state Sen. Phil King told a hearing earlier this year that the grid operator, utility regulators and utilities weren't sure if the power requests "are real or just speculative or somewhere in between." Lawmakers passed legislation sponsored by King, now law, that requires data center developers to disclose whether they have requests for electricity elsewhere in Texas and to set standards for developers to show that they have a substantial financial commitment to a site. Electricity bills are rising, too PPL Electric Utilities, which delivers power to 1.5 million customers across central and eastern Pennsylvania, projects that data centers will more than triple its peak electricity demand by 2030. Vincent Sorgi, president and CEO of PPL Corp., told analysts on an earnings call this month that the data center projects "are real, they are coming fast and furious" and that the "near-term risk of overbuilding generation simply does not exist." The data center projects counted in the forecast are backed by contracts with financial commitments often reaching tens of millions of dollars, PPL said. Still, PPL's projections helped spur a state lawmaker, Rep. Danilo Burgos, to introduce a bill to bolster the authority of state utility regulators to inspect how utilities assemble their energy demand forecasts. Ratepayers in Burgos' Philadelphia district just absorbed an increase in their electricity bills -- attributed by the utility, PECO, to the rising cost of wholesale electricity in the mid-Atlantic grid driven primarily by data center demand. That's why ratepayers need more protection to ensure they are benefiting from the higher cost, Burgos said. "Once they make their buck, whatever company," Burgos said, "you don't see no empathy towards the ratepayers." ___ Follow Marc Levy at http://twitter.com/timelywriter.

AI Data Centers Blamed for Surging Electricity Prices for Homeowners in Key States

There is a growing backlash against rising energy costs, which are becoming a central issue in state politics. As electricity bills climb across the nation, the booming artificial intelligence industry is facing intense scrutiny. The massive data centers required to power AI are being blamed for significant price hikes in several states, turning up the political heat as mid-term elections approach. While residential utility bills saw a 6 percent average increase nationwide in August compared to the previous year, according to the U.S. Energy Information Administration, some states with a high concentration of data centers experienced much steeper rises. Electricity prices surged by 13 percent in Virginia, 16 percent in Illinois, and 12 percent in Ohio during the same period. These states are at the heart of the American data center boom. Virginia, in particular, has the highest concentration of data centers in the world, with 666 facilities, according to Datacentermap.com. Illinois follows with 244, and Ohio has 193. All three are primarily served by the same grid operator, PJM Interconnection, the largest in the United States. The unprecedented demand from these energy-hungry facilities is straining the electric grid. An independent watchdog monitoring PJM's power capacity auctions found that data center demand accounted for $9.3 billion, or 63 percent, of the total power capacity bill for 2024. Data centers are projected to use up as much as 12 percent of the nation's electricity by 2028, according to a U.S. Department of Energy report. "Data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices," according to Monitoring Analytics' June Independent Market Monitor report. There is a growing backlash against the rising costs, which is becoming a central issue in state politics. In Virginia, newly elected Governor Abigail Spanberger successfully campaigned on the rising cost of living, placing part of the blame on data centers and vowing to make tech companies "pay their own way and their fair share." The higher costs often appear stealthily, embedded within electricity supply charges rather than as a distinct line item on bills. David Lapp, Maryland's People's Counsel, the state's top official focused on consumer advocacy for utility bills, warns that this is just the beginning. "Existing customers are taking hits now and will take much greater hits going forward," he told CNN. Looming on the horizon are even greater costs. PJM has proposed more than $11 billion in transmission upgrades, primarily to serve new data centers. According to Mr. Lapp, these costs, passed on to ratepayers, could eventually top $40 billion. "We're looking at the equivalent of Maryland's [entire electricity] demand built up over more than a century, being built in Northern Virginia in five years," Mr. Lapp said. A Harvard Law School paper from March found that despite the regional cost-sharing model, ratepayers in Virginia and Maryland will bear the brunt of infrastructure built to serve the world's richest companies. "The very same rate structures that have socialized the costs of reliable power delivery are now forcing the public to pay for infrastructure designed to supply a handful of exceedingly wealthy corporations," said the paper. The political fallout is not just local. Some Democrats in Congress have criticized the close relationship between the White House and major tech companies. Senators Richard Blumenthal of Connecticut and Bernie Sanders of Vermont recently condemned what they called the administration's "sweetheart deals with Big Tech companies," accusing it of failing to protect consumers from "being forced to subsidize the cost of data centers." While other factors like an aging grid and inflation contribute to rising electricity costs, the watchdog report from Monitoring Analytics emphasized the unique pressure from AI. It said that the rapid load growth from data centers is "unprecedented" and that it is "misleading to assert that the capacity market results are simply just a reflection of supply and demand."